JUL-AUG 2018

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CONTACT RTA WEBSITE BECOME A MEMBER BECOME A MEMBER RTA WEBSITE CONTACT Cahaba Pressure Treated Forest Products Eagle Metal Products East Coast Railroad Gross & Janes Co. Hurdle Machine Works Koppers Inc. CROSSTIES • JULY/AUGUST 2018 6 XXX ASLRRA REPORT Editor's Note: RTA was actively involved in assisting ASLRRA to secure and vet the economic research on the impact of tie purchases occurring before and after enactment of the Section 45G tax credit. RTA's contribution to the report is noted within. For a full copy of the report, log onto>News. he American Short Line and Regional Railroad Association (ASLRRA) in July released an economic impact report. Prepared by the professional services firm PricewaterhouseCoopers LLP (PwC), the report demonstrates that the short line industry, composed of 603 Class II and III railroads, provides significant contributions to the U.S. economy: • The total direct, indirect, and induced impact of the 603 small business short line railroads is 61,070 jobs, $3.8 bil- lion in labor income, and $6.5 billion in value added to the U.S. economy in 2016. • Industries reliant on short line trans- portation services provided 478,820 jobs, $26.1 billion in labor income, and $56.2 billion in value added to the U.S. economy in 2016. In addition, the report looked at the investment impact of the Short Line Tax Credit (also known by its tax code reference, 45G), which expired Dec. 31, 2017, and has been a criti- cal investment vehicle for short line rail- roads since its inception in 2004. Since the Short Line Tax Credit has been in place, derailments have declined by 50 percent due to the infrastructure investment in ties and better rail. Extension of the credit is estimated to drive a 63 percent reduc- tion in the cost of capital, which provides a strong incentive to continue to increase investment in short line infrastructure. Finally, the report compares the benefit of the Short Line Tax Credit to the benefit of the Tax Cuts and Jobs Act in this industry. The report shows that the Short Line Tax Credit provides a significantly more compel- ling increase in investment. ASLRRA is calling for Congress to make the Short Line Tax Credit permanent. The report's Executive Summary follows: Industry Overview The U.S. short line and regional railroad industry (short line industry) consists of the nation's smallest freight railroads by rev- enue, defined according to the U.S. Surface Transportation Board as Class II or III railroads with freight revenue of less than $475.75 million in 2016. There are an esti- mated 603 short line railroads as of 2016. The average short line railroad employs fewer than 30 people and operates less than 79 route miles. Combined, short lines oper- ate 47,500 route miles, or 29 percent of the nation's rail network, extending the reach of the rail network to rural communities, farm- ers, manufacturers, and other industries. 1 Short lines, together with the seven Class I railroads (those with freight revenue of at least $475.75 million), constitute the U.S. freight railroad industry. Economic Contribution Of The Industry PwC estimates the short line industry directly provided 17,100 jobs in the United States in 2016, paying labor income of $1.1 billion and adding $2.2 billion to the nation's GDP (see Table E-1). The short line industry's economic impact goes beyond its own employees and direct payroll and T ASLRRA Economic Impact Report Reveals Short Lines' Contribution To Economy Short line customers add $56.2 billion to the nation's economy and provide 478,000 jobs Table E-1. Direct, Indirect, and Induced Economic Impacts of the US Short Line Industry, 2016 Item Direct impacts Indirect and induced impacts Combined Impacts Operational Impacts Capital Investment Impacts Employment* 17,100 33,730 10,240 61,070 Labor Income ($ millions)** $1,129 $2,035 $616 $3,780 Value Added ($ millions) $2,228 $3,373 $948 $6,549 Source: PwC calculations using the IMPLAN modeling system (2016 database). Note: Details may not add to totals due to rounding. *Employment is defined as the number of payroll and self-employed jobs, including part-time jobs. **Labor income is defined as wages and salaries and benefits as well as proprietors' income. The engineer of a Farmrail train positions freight cars (grain hoppers) for loading at a large grain elevator in Oklahoma. Farmrail System Inc. is an employee-owned holding company for two Class III common-carrier railroads comprising "Western Oklahoma's Regional Railroad."

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